Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Third Report

Formal Minutes

Tuesday 23rd May 2006

Members present:

Dr Phyllis Starkey, in the Chair
Mr Clive Betts

Lyn Brown

John Cummings

Martin Horwood

Mr Bill Olner

Alison Seabeck

Affordability and The Supply of Housing

Draft Report (Affordability and the Supply of Housing), proposed by the Chairman, brought up and read.

Ordered, That the Chairman's draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 171 read and agreed to.

Summary —(The Chairman)—brought up and read as follows

"S.1. The Government's plans for a major house-building programme show a strong commitment to meeting the needs of those living in unsatisfactory housing and those whose aspirations to home purchase are not being fulfilled. There have been long discussions about the scale of the house-building programme required for the growing numbers of households, with different organisations offering a range of projections. During our inquiry, the Government published new housing projections which suggested that the number of households was growing at about 209,000 per year, about 20,000 higher than the previous estimate. Any house-building target has to be sufficient to match household growth. The Government has set a target of 200,000 additional homes per year by 2016, about 40,000 more than is currently built. Bearing in mind the new household growth projections, this target may be inadequate. Several assumptions are however built into the projections which may prove false. As housing policy is increasingly based on household growth projections, it is important that these projections are kept under review as firmer information becomes available.

S.2. Promoting homeownership is an underlying objective of the Government's programme. Homeownership offers unparalleled opportunities for households to accumulate wealth, but for some, it is not an option, and the provision of social housing for rent should be given equal priority. In recent years, there has been an increase in the development of affordable housing funded through the Housing Corporation but the increase has mainly been in shared ownership and equity share schemes. There are about 100,000 households in temporary housing. The balance given to different forms of tenure will vary, according to the needs of different areas. It is important that, in the 2007 Comprehensive Spending Review, there is a major increase in funding for social rented housing. In addition, it is important that the new house-building programme caters for a wide range of needs. The recent increase in two bedroom flats in town and city centres needs to be balanced by an increase in family housing which ensure mixed sustainable communities. The needs for older people and the disabled should also not be overlooked in the pressure to promote an increase in private housing.

S.3. The particular nature of the housing market means a simple supply and demand model cannot be applied to the housing market. With the multitude of factors affecting house prices it is very difficult to support an increase in housing supply simply on the basis of improving affordability. The recent increase in homeownership and growing levels of consumer debt have made many households vulnerable to losing their homes. The Government should look at how it can tackle this situation.

S.4. The Government's commitment to promoting a major-building programme offers a one-off opportunity to provide model housing developments that reinforce the role of our towns and cities by fostering sustainable communities, which are well provided with the necessary services at the outset, and which achieve very high levels of environment efficiency.

S.5. We were struck by the concerns in much of the evidence about the relaxation in planning controls proposed in the new draft PPS3 which could result in urban sprawl and undermine regeneration efforts in established urban centres. There is an argument for responding to market pressures, in particular in areas with more jobs than homes. The opportunity, however, must be grasped, wherever possible, to revitalise areas suffering from low housing demand, where giving in to market pressure to build in high demand areas on the edge of cities would further hollow out those inner city areas. Local authority powers to prioritise developments on brown field sites in urban areas should not be eroded.

S.6. Too often in the past housing has been built with the necessary infrastructure being put in place afterwards. Progress is being made to identify funds for the new transport links, health services and schools to serve the new housing developments. To allay local community concerns that the new house-building will put extra strain on existing services, a more structured approach is required with forward funding mechanisms in place to demonstrate that the facilities will be in place as the first residents move in, and that revenue funds are available to support them in the long term. The 2007 Comprehensive Spending Review will be an opportunity for the Government to demonstrate its commitment.

S.7. With much of the development being planned in the wider South East, an area with major water shortages and significant flood plains, the house-building programme will have to be carefully managed. Such facilities as reservoirs and sewage works will have to be planned into the programme at the outset as many could take up to 20 years to be developed.

S.8. A major house-building programme could have a significant impact on climate change. However, the environmental impacts can be reduced, if the new housing incorporates water and energy saving devices. The Government published the draft Code for Sustainable Homes, which aims to improve the environmental performance of new homes. It is important that the code is sufficiently aspirational and that the Government sets a timetable for incorporating it into the Building Regulations leading the way to even higher environmental standards. Incentives are also required so that the environmental performance of existing homes is improved."

Amendment proposed, in paragraph S. one, line 1, after the word "programme" to leave out from "show" to the word "fulfilled" in line 3 and insert the words "are based on their belief that increasing the volume of housing stock is the most important way to tackle the crisis of unaffordable housing in the UK".—(Martin Horwood.)

Question proposed, That the Amendment be made.

Proposed amendment amended, in line 2, by leaving out the word "their" and inserting the words "the widespread".—(Alison Seabeck.)

Proposed Amendment, as amended, made.

Another Amendment proposed, in paragraph S. one, line 12, after the word "projections" to insert the words "the Government believes".—(Martin Horwood.)

Question, That the Amendment be made, put and negatived.

Another Amendment proposed, in paragraph S. two, line 19, after the word "priority" to insert the words "The current levels of home ownership may not be sustainable. Some households have very high levels of debt, and are vulnerable to increases in interest rates and other economic changes".—(Martin Horwood.)

Question, That the Amendment be made, put and negatived.

Another Amendment proposed, in paragraph S. two, line 10, after the words "social rented housing." to insert ""Many witnesses pointed to the complexity of the housing market There are many factors, other than supply, which affect affordability of housing. Witnesses variously mentioned migration within the UK, mortgage lending policies, the decline of social rented housing, the use of housing as an investment and local factors associated with quality of life that cause high variances in demand in adjacent areas. It is important for Government too to avoid an over-simplistic reliance on one policy and examine a range of strategies which might influence demand such as interest rates, the availability of credit and taxation, as possible approaches to stemming price rises and improving affordability."

"It is unclear what impact the Government's objective to increase house-building to 200,000 by 2016 would have on affordability. We believe that more important than a dispute over the national figures for extra housebuilding are questions over where the extra housing should be provided, what type of housing is required, and how extra housing is to be built without causing an unacceptable burden on the environment".—(Martin Horwood.)

Question proposed, That the Amendment be made.

Proposed Amendment amended, in line 4, by leaving out from the word "Witnesses" to the end of the amendment and insert the words "It is important for Government to avoid an over-simplistic reliance on one policy and to examine a range of strategies".—(Clive Betts.)

Proposed Amendment, as amended, made.

Another Amendment proposed, in paragraph S. four, line 1, to leave out from the word "commitment" to the word "to" in line 2 and insert the words "house-building programme should".—(Martin Horwood.)

Question, That the Amendment be made, put and negatived.

An Amendment made.

Another Amendment proposed, in paragraph 8, line 1, to insert at the beginning, the words "There are still more dwellings than households in England. That we still encounter such series problems of affordability underlines the importance of demand as well as supply in the housing market. This is demonstrated by patterns of migration and complex local factors such as schooling and employment which create patterns of differential demand in closely adjacent areas"—(Martin Horwood.)

Question, that the Amendment be made, put and negatived.

Another Amendment made.

Summary, as amended, agreed to.

Resolved, That the Report, as amended, be the Third Report of the Committee to the House.

Ordered, That the Chairman make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

Several Papers were ordered to be appended to the Minutes of Evidence.

Ordered, That Appendices to the Minutes of Evidence taken before the Committee be reported to the House.

[Adjourned till Monday 5th June at twenty past Four o'clock.

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